Bank Of India And Anr. vs Madura Coats Ltd.
2008 Latest Caselaw 2309 Del

.                     HIGH COURT OF DELHI : NEW DELHI

+                          FAO (OS) No.227/2003

                                  Judgment reserved on : 23rd July, 2008

                                  Pronounced on :           19th December, 2008

     BANK OF INDIA AND ANR.                               ...Appellants
                                  Through     : Mr. Y.P. Narula, Sr. Adv. with
                                                Mr. Sanjay Gupta & Mr. Amit
                                                Shukla, Advocates
                                  Vs.

     MADURA COATS LTD.                                   ....Respondent

Through : Mr. Girdhar Govind, Adv. with Ms. Noorun Nahar Firdausi, Adv.

Coram:

HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to Reporter or not?

3. Whether the judgment should be reported in the Digest? Yes

MANMOHAN SINGH, J

1. This appeal has been filed by the appellants ('defendants No.1

and 2' in the suit) against the order passed by the learned Single

Judge on 21st April, 2003 whereby the application of appellants

for leave to defend was dismissed and the suit was decreed in

favour of the respondent ('plaintiff' in the suit).

2. The Plaintiff filed the suit for recovery of Rs.87,99,121/- along

with interest under Order 37 of Code of Civil Procedure against

the defendants (appellants herein) and M/s Hilton Rubbers Ltd.

i.e Defendant no. 3.

3. It was submitted that M/s Hilton Rubbers Ltd. i.e. Defendant no.

3 had placed orders with the Plaintiff for supply of Nylon and

Polyester based fabrics vide different Purchase Orders, details of

which are mentioned hereinbelow :-

(i) Purchase Order No. 165 dated 01.02.99

(ii) Purchase Order No. 168 dated 13.02.99

(iii) Purchase Order No. 169 dated 01.03.99

(iv) Purchase Order No. 170 dated 01.03.99

(v) Purchase Order No. 173 dated 22.03.99

(vi) Purchase Order No. 172 dated 04.03.99

(vii) Purchase Order No. 174 dated 11.03.99

4. M/s Hilton Rubbers Ltd. had arranged to open irrevocable Letters

of Credit through Plaintiff in his favour being the beneficiary for

the said irrevocable Letters of Credit.

5. The State Bank of India, Industrial Finance Branch, Madurai acted

as advising/negotiating bank for the payment of material

supplied against the aforesaid Purchase Orders. The details of

said irrevocable Letters of Credit opened by the defendants in

favour of Plaintiff are as follows:-

(i) LC No. NDCBB/6041/ILC/16/10

dated 10.05.1999 for Rs. 53,54,000.00

(ii) LC No. NDCBB/6041/ILC/15/143 dated 23.03.1999 for Rs. 11,51,000.00

(iii) LC No. NDCBB/6041/ILC/16/28 dated 23.06.1999 for Rs. 19,50,000.00

(iv) LC No. NDCBB/6041/ILC/15/136 Dated 10.03.1999 for Rs. 10,00,000.00

(v) LC No. NDCBB/6041/ILC/15/144 dated 24.03.1999 for Rs. 10,46,000.00

6. It is averred in the plaint that despite repeated requests made by

the Plaintiff, the defendant did not make payment under the

respective irrevocable letters of credit. The plaintiff has also

submitted that the letters of discrepancies alleged to have been

issued by the defendants were never sent or issued by the

Defendants to the advising/negotiating Bank and the same were

fabricated by the Defendants after the Plaintiff and

advising/negotiating Bank repeatedly pressed for payment of bills

sent under the aforesaid Letters of Credit. Thus, the suit was filed

by the Plaintiff against the Defendant for non-payment of the

amounts under Letters of Credit.

7. The plaintiffs in the plaint has specifically pleaded the alleged

letters of discrepancies to him and SBI, Industrial Finance Branch,

Madurai (Negotiating Bank) with regard to the Letters of credit

and alleged them to be fabricated/manufactured/afterthought

documents. Para 7, 8 and 10 in this regard reads as under:-

"7. The plaintiff submits that despite repeated requests made, the defendant No.1 did not make payment under the respective irrevocable LCs. On approaching the defendant No.1 for payment the plaintiff was conveyed in a very casual manner that there were certain discrepancies in the LC's and that the defendants had written some alleged letters to SBI Industrial Finance Branch, Madurai. The copies of the alleged letters of discrepancies alleged to have been issued by defendant No.1 mentioning the alleged discrepancies and handed over to the representatives of the plaintiff by the defendant No.1 when the plaintiff's representatives called uon the defendant at it's office are annexed as Annexure D-1 to D-4 in the list of documents attached with the plaint.

8. The plaintiff submits that the alleged letters of discrepanicies said to have been issued by defendant No.1 to advising/negotiating Bank mentioning the discrepancies were nothing but an afterthought, anti- dated and, completely fabricated documents and were never sent or issued by the defendant No.1 to the advising and negotiating bank and were created after the plaintiff and advising and negotiating bank repeatedly pressed for payments of bills sent under the aforesaid LCs. The fabrication and manufacture of alleged letters of discrepancies is further borne out from the alleged letter dated 13.3.99 of defendant No.1 wherein the mention of LCs and bills of dates subsequent to the dated of alleged letters i.e 23.3.99 and 24.3.99 has been made. How could the defendant No.1 mention in the said alleged letter of discrepancy dated 13.3.99 LCs of dated 23.3.99 and 24.3.99 and bills of subsequent date. When the plaintiff brought the fact of issue of alleged letters of discrepancies by defendant No.1 to the knowledge of State Bank of India, Industrial Finance Branch, the advising and negotiating Bank The State Bank of India were surprised and taken aback that defendant No.1 had chosen to refer to some alleged letters of discrepancies which the State Bank of India did not receive or was not even aware of. The State Bank of India promptly wrote a letter dated 21.8.99 to defendant No.1 pointing out that the plaintiff had brought to its knowledge the 4 letters purported to have been written

by defendant No.1 to them The State Bank of India in its letter dated 21.8.1999 stated that they were surprised to note that none of the 4 letters said to have been sent to them on different dates ever reached them This corroborates the connection of the plaintiff that the said 4 letters (Annexure D-1 to D-4) in the list of documents were fabricated and manufactured documents, were an afterthought to raise the objection in the LC which did not exist so as to avoid their obligation of making payment covered under the relevant irrevocable LCs. The letter dated 21.8.99 of State Bank of India is annexed as Annexure-F with list of documents of the plaint. The said alleged letters of discrepancies have not reached State Bank of India, Madurai, till date.

xxxxx xxxxx

10. The plaintiff submits that without prejudice to its contention that defendant No.1 had fabricated alleged letters of discrepancies (Annexure D-1 to D-4) several meetings with plaintiff's representative, the defendant No.1 released proceeds against LC No. NDCBB/6041/LC/15/144 dated 24.3.99 to the extent of Rs.10,45,612.00 to the collecting bank as recently as on 28.8.99. It is surprising as to how defendant No.1 could release the payment of one LC despite alleged discrepancy and withhold the payment of Rs.83,54,273.00 covered under the other LCs on the alleged ground of discrepancy, which are similar to that of LC against which the payment has been made on 28.8.99."

8. Even in the other paragraphs of the plaint the plaintiff has urged

that the defendant bank has fabricated the documents of the

alleged discrepancies to deprive the plaintiff of its legitimate

dues. However, it was submitted that the discrepancies

mentioned by the bank are no discrepancies in the eyes of law or

otherwise.

9. The Plaintiff had also preferred Writ Petition No.5894/1999

against the defendants and others on almost the similar grounds

as pleaded in the suit which was dismissed inter alia on the

ground that relief claimed in the suit as well as this petition

were same.

10. The Defendant filed an application bearing IA no.10691/2000

under Order XXXVII Rule 3(5) read with Section 151 of Code of

Civil Procedure seeking leave to defend the suit inter-alia, on the

grounds that there are allegations of false claims, fabrication of

documents, alleged not to have been issued, manufacturing of

letters of discrepancies; commission of criminal offences, which

needs trial and, hence, the suit under Order XXXVII is bad for this

ground and unconditional leave to defend the suit be granted on

this ground alone.

11. It was further alleged that the dispute is a pure dispute on

contract/commercial transaction and the conduct of Defendants

is in the discharge of their contractual duties in the matter of

establishment and payment under Letters of Credit. The refusal

to make payment is on the basis of the discrepancies as observed

in the documents received under letters of credit, hence the bank

has acted on its commercial judgment in accordance with its

contractual rights.

12. It is submitted that the payment of Rs.10,45,612/- under

discrepant Letter of Credit was made by the Defendant No.1 on

28.8.1999, on specific instructions vide letter dated 27.08.1999

from the Defendant No.3, for which funds were also arranged by

them. Each Letters of Credit is a separate contract, and hence,

documents presented thereunder form the subject matter of

different contracts. Payment of a document under one Letter of

Credit, therefore, does not constitute any obligation to make

payments towards other discrepant documents presented under

the same or other Letters of Credit.

13. In the reply filed by the plaintiff to the application of the

defendant seeking leave to defend, it was submitted that the

liability of the defendants arises out of letters of credit issued by

the defendants and in terms thereof the liability stands admitted

by the defendants and as such, they are not entitled to leave to

defend. The defendants cannot absolve themselves of the liability

merely by stating that the transactions took place between

plaintiff and Defendant No.3. It was alleged that the letters of

credit were issued by the defendants on the basis of which the

material was supplied to Defendant No. 3 and the alleged letters

were forged, fabricated and created to defeat the claim of the

plaintiff.

14. Learned senior counsel for the defendants/appellants has

vehemently argued that the plaintiff himself has made allegations

of fraud and forgery against the defendant not only in the civil

suit decided by the Ld. Single Judge but also in the writ petition

filed by plaintiff. He has argued that the Ld. Single Judge has

failed to consider the disputes existing and pending between the

parties. The Ld. Single Judge failed to appreciate that the defense

of the defendants raised "triable issues", warranting the grant of

leave to defend.

15. Learned counsel for the defendant has also submitted that the

Ld. Single Judge failed to appreciate the fact that the refusal to

make payment under Letters of Credit was on the basis of the

discrepancies as observed in the documents received under

Letters of Credit. The discrepancies on account of which

payment under Letter of Credit were declined, were duly

intimated by the defendant. The letters of intimation by the

defendant were disputed by the plaintiffs and that itself had

given rise to "triable issue". The allegation of fraud and forgery

of the documents could have only been decided by way of trial

and therefore the defendants were entitled to unconditional

leave to defend.

16. Learned counsel for the plaintiff/respondent, on the other hand

while countering the argument of the learned counsel for the

defendants has stated that there are discrepancies in the

documents and has disputed that no intimation was sent to the

negotiating Bank informing discrepancies and alleged letters

produced and relied upon by the defendant are fabricated and

manipulated document and the entire defence of the defendants

are an afterthought.

17. We have considered the rival submissions of the parties and have

also gone through the relevant record. The learned Single Judge

while dismissing the suit against Defendants observed that since

Defendant no.3 is covered under the protection of SICA , the

plaintiff had no reason to look towards it, the liability of the bank

is dehors and not connected in any manner with Defendant no.3

and rejected the application of the defendant nos. 1 and

2/appellants seeking leave to defend vide his order dated 21st

April, 2003 and passed decree in favour of the plaintiff and

against the defendant nos. 1 and 2. It was further observed that

there is no allegation of any irregularity committed by the

plaintiff in so far as the invocation of the letters of credit is

concerned and leave to defend application is declined to the

bank..

18. It is settled law that in a summary suit, in order to entitle the

defendants for leave to defend, it would be incumbent upon

them to show that they have a substantial defence and triable

issue to raise and their defence is not frivolous or vexatious. AIR

1988 Delhi 308(310).

19. As a rule, where a valid defence or triable issue is disclosed and

defence is bona fide, the leave should be granted

unconditionally. Following are the principles that are to be

followed by the Court while considering the question of granting

leave to defend:

(a) If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is not entitled to leave to defend.

(b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.

(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence yet shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.

(d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend.

(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise

secured and given to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence." AIR 1977 SC 577(580).

20. It is also well settled law that at the stage of granting leave to

defend, parties rely on affidavits in support of the rival

contentions. Assertions and counter-assertions made in

affidavits may not afford safe and acceptable evidence so as to

arrive at an affirmative conclusion one way or the other unless

there is a strong and prima facie material available to show that

the facts disclosed in the application filed by the applicant

seeking leave to defend were either frivolous, untenable or most

unreasonable. No hard and fast rule or straight jacket formula

can be laid down for judging this question.

21. The Bombay High Court in Defence Knitting Industries (P) Ltd. V.

Jay Arts, (2006) 8 SCC 25 reiterated the abovesaid position while

holding that:-

" While giving leave to defend in the suit the court shall observe the following principles:

(a) "If the court is of the opinion that the case raises a triable issue then leave to defend should ordinarily be granted unconditionally. The question whether the defence raises a triable issue or not has to be ascertained by the court for the pleadings before it and the affidavits of parties.

(b) If the court is satisfied that the facts disclosed by the defendant do not indicate that he has a substantial defnce to raise or that the defence intended to be put up by the defendant is frivolous or vexatious it may refuse leave to defend

altogether.

(c) In cases where the court entertains a genuine doubt on the question as to whether the defence is genuine or sham or whether it raises a triable issue or not, the court may impose conditions in granting leave to defend."

22. In John Impex (P) Ltd. v. Surinder Singh and others, (2003) 9

Supreme Court Cases 176 it was held :-

"The submission on behalf of the respondent is that the lease deed clearly confirms the title of the respondent. But this again is a matter to be considered at trial not at this stage i.e. leave to defend application. At this stage neither evidence is to be weighed nor looked into. The purpose of introducing a provision like leave to defend, is only to find out frivolous, uncontestable cases at the initial stage, not to eliminate other class of cases which require adjudication after contest. In other words if there be no conceivable contest possible the litigation has to be nipped in the bud. "

23. In Raj Duggal Vs Ramesh Kumar Ms. Prem Lata Bansal, Adv., AIR

1990 SC 2218; it was observed as follows:-

"Leave is declined where the Court is of the opinion that the grant to leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defenses. The test is to see whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defence on those facts. If the court is satisfied about the leave it must be given. If there is a triable issue in the sense that there is a fair dispute to be tried as to the meaning of a document on which the claim is based or uncertainty as to the amount actually due or where the alleged facts are of such a nature as to entitle the defendant to interrogate the plaintiff or to cross examine his witnesses leave should not be denied. Where also, the defendant shows that even on a fair probability he has a

bona fide defence, he ought to have leave. Summary judgments under order 37 should not be granted where serious conflict as to the matter of fact or where any difficulty on issues as to law arises. The court should not reject the defence of the defendant merely because of its inherent implausibility or its inconsistency."

24. Learned counsel for the plaintiff has referred to the case of

Hira Lal & Sons & others v. Lakshmi Commercial Bank, 25 (1984) Delhi

Law Times (SN) 33 where the principles for granting or refusal leave to

defend are being laid down in the following words:-

"The principles on which courts should grant or refuse leave to defend the suit are not in doubt. Thus:

(a) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend.

(b) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the court may in its discretion impose conditions as to the time or mode of 'trial but not as to payment into court of furnishing security'."

25. From the above said discussion, it is clear as enunciated by Apex

Court in a plethora of Judgments, that wherever the defense

raises "triable issues", leave to defend must be granted and when

that is the case it must be given unconditionally.

26. Let us now deal with the averments/defences raised in the

application filed by the defendant nos. 1 and 2 under Order 37

Rule 3(5) read with Section 151 of the Code of Civil Procedure,

1908.

27. The question before us is whether the defences raised by the

defendant are prima facie valid, fair and bona fide defences

which raise the real triable issue or whether those are simply

sham or practically moonshine. If valid defences are raised, then

ordinarily the plaintiff is entitled to a decree straightway. The

following are the main defences raised by the defendant :-

(a) There are allegations of false claims, fabrication of documents, alleged not to have been issued; manufacturing of letters of discrepancies; and allegation of commission of criminal offences, which needs trial;

(b) The said letters were not sent by the Bank or that the same were fabricated as an afterthought;

(c) The plaintiff who are themselves at fault for having presented discrepant documents and cannot fault the Defendant Nos.1 and 2 for declining the payment;

(d) That on the one hand, in para 7 of the writ petition, the plaintiff have stated that alleged discrepancies in the letter of credit were learnt by them from their bankers namely Messrs. State Bank of India and in para 8 of the plaint, the plaintiff have said that they had brought to the knowledge of their bankers, i.e., Messrs. State Bank of India regarding alleged discrepancies in the letters of credit, which State Bank of India conveyed to the defendant No.1 through their alleged letter dated 21.8.1999;

(e) That the plaintiff had produced the documents containing the goods different than that specified in the Letter of Credit and the plaintiff was seeking payment against those goods, which were not covered under the Letters of Credit;

(f) That whereas under the terms and conditions of the Letters of Credit, the State Bank of India, Madurai Branch were not indicated as the Negotiating Bank, however, from the correspondence exchanged amongst the parties, they seemed to act as such, and hence, it was for this reason that communications were sent to them and the defendant No.1 on several occasions sought instructions from them, which instructions never came;

(g) That the terms and conditions of the said Letters of Credit are a matter of record. As and when discrepancies were observed and found, in the documents presented, the defendant No.1 accordingly under the terms of the Letters of Credit/provisions of U.C.P. 500/contract, made intimation, declining payments for the reasons indicating therein. As per customary banking procedure, such intimation were sent to the presenting banker. The refusal to make payment is on the basis of the discrepancies as observed in the documents received under Letters of Credit, and hence, the bank has acted on its commercial judgment in accordance with its contractual rights;

(h) The reasons for non-payment are contained in the letters which are allegedly sent by the defendant No.1 to State Bank of India, Madurai (Negotiating Bank) and the defendant No.1 Bank was not obliged to make payment where documents presented were not in conformity with Letters of Credits.

28. What is relevant in the present case are the terms incorporated

in the guarantee executed by the bank. It is well settled law that

the bank guarantee is an independent contract between the bank

and the beneficiary thereof. We are of the view that since the

entire dispute is based on the allegations whether there is

fabrication of letters or not and whether the payment could be

stopped by the defendants No.1 and 2 on the alleged

discrepancies in the document, there certainly exists a 'triable

issue' which needs trial and is a plausible issue which validly gives

the ground to the defendants for leave to defend.

29. The application to honour the letters of credit having been

conditional one, therefore, prima facie, the

defendants/appellants are absolved of their liability to honour

the letters of credit and to pay the value of the goods being the

letters of credit a conditional contract. (Ref: State Bank of India

& Ors. vs. Manganese Ore (India) Ltd. & Anr, (1996) 11 SCC 113).

30. We are conscious of the fact that if bank guarantee is in

unequivocal and unconditional terms, the bank undertakes to pay

the amount without any demur or objection and irrespective of

any dispute, court would refrain from issuing the injunction. But

if bank guarantee is conditional, the beneficiary cannot have

unfettered right to invoke the guarantee and court can issue

injunction against invocation of the guarantee in view of the facts

of the case.

31. Learned counsel for the plaintiff has referred to the

judgment of this court in Laxmi Commercial Bank v. Hiralal, 1981

Rajdhani Law Reporter (Note) 94; wherein leave to defend

application was dismissed and it was held that the plea of

defendant that there was discrepancy in the documents is hollow

as defendant was given 7 days to make the payment. If there was

any discrepancy in the documents, same should have

been brought out within 7 days and on expiry of this, liability, of

defendant became absolute.

32. We feel that the said judgment does not help the case of the

plaintiff since in the present case, facts and circumstances are

that the defendant no. 1 allegedly written four letters dated

8.4.1999, 28.3.1999, 22.5.1999 and 31.5.1999 informing about

the discrepancies in the letters of credit well in time though the

plaintiff has denied about receiving of the said letters and made

the allegation against the defendants that the said letters are

false, fabricated, manufactured and afterthought. The defendants

on the other hand have denied the said allegations of the

plaintiff. Therefore facts in the present case are different as the

alleged letters of discrepancies are in dispute as contrary to the

stand taken by the plaintiff. This aspect is to be examined in the

trial.

33. The learned counsel for the defendants has pointed out and

made his submissions that under the letters of credit, a

conditional contract was entered into between the parties. Some

of the clauses relating to the letters of credit and the alleged

discrepancies raised by the defendant-bank in their four letters

are shown as under:-

Terms and conditions in the Discrepancies letters of credit

(a) Invoices should certify (a) Description of goods

that the goods are as per differ as per the details of importer's purchase order the invoice/letter of indent number. credits;

         (b)     Evidencing current          (b) Shipment made from
         shipment        of     the          Madurai to Badhkhasla
         undermentioned goods from           instead of Madurai to
         xxxxMadurai xxxxx to xxxx           Badhkhasla via Delhi UP
         Badkhalsa via Delhi UP              Border
         Border.

         (c) Documents must be               (c)     Documents not
         negotiated not later than 15        negotiated within the 15
         days after the date of              days after the date of
         shipment/dispatch and in any        shipment.
         case, not later than the date
         of expiry of the credit.

34. The learned Single Judge has referred various decisions in this regard on the question of unconditional Bank Guarantee and we are in agreement with the findings and principles laid down in the said judgments but in the present case the Letters of Credits are conditional, thus, the facts and circumstances differ in the present case, and the defendants should not be debarred to put up their defence and should be allowed to go for trial of the suit against the allegation about the fabrication and manipulation of the letters stated in the plaint.

35. In the judgment of the Apex Court in United Commercial Bank vs. Bank of India & Ors. (1981) 2 SCC 766, it is held that where under the letters of credit, description of goods differ from those mentioned in any of the clauses, the paying bank may refuse payment. Relevant portion is extracted below :

"....The description of the goods in the relative bill of exchange must be the same description in the letter of credit, that it, the goods themselves must in each be

described in identical terms, even though the good differently described in the two documents are, in fact, the same. It is the description of the goods that is all important and if the description is not identical it is the paying bank's duty to refuse payment."

36. We are of the view that the learned Single Judge wrongly refused

the application of the defendants for granting leave to defend as

prima facie it is disputed fact whether there exist discrepancies in

the documents, the details of which are mentioned in the four

letters allegedly written by the defendant No.1 to the negotiating

bank and allegations of fraud and forgery are raised in the plaint

by the plaintiff himself, leave to defend could not have been

refused to the appellants. The said allegations are still to be

looked into and require trial and thereby raises triable issues.

Further the defendant No.1 is a known bank and in case any

decree is passed against the said bank after trial, the said bank is

in a position to pay the decreed amount, on the other hand in

case, no chance is given to the defendants in facts and

circumstances of the present case, great injustice would be

caused to the defendants to suffer a decree without trial of the

suit. Therefore, we feel that the trial in the present circumstances

is required and the defendants No.1 and 2 are entitled to the

grant of leave to defend the suit on conditional basis.

37. In our considered view the defendants are entitled to leave to

contest the suit subject to furnishing a bank guarantee for 50%

of the principle amount i.e. Rs.43,99,561/- alongwith interest @

9% p.a. The said amount of 50% has already been deposited by

the defendants by way of execution of bank guarantee in view of

order dated 30th May, 2003 while admitting the appeal. The said

bank guarantee was accepted by learned Registrar General vide

order dated 8th March, 2004 which is valid until disposal of the

present appeal i.e. FAO (OS) No.227/2003. Now the said bank

guarantee which is already accepted by the Registrar General will

continue as a condition of 50% till the disposal of the suit.

38. We, therefore, set aside the impugned order and allow the

application of the defendant nos. 1 and 2/appellants filed under

Order 37 Rule 3(5) of the Code of Civil Procedure, 1908 to grant

leave to defend the suit.

39. The defendant nos. 1 and 2 are granted four weeks' time to file

the written statement from the date of this order. The matter

shall be put up before the Joint Registrar on 30th January, 2009

for further directions.

40. We make it clear that any observation made herein shall be

treated as tentative in nature and shall not constitute any

expression of final opinion on the issues involved in Appellant's

suit and shall have no bearing on the final merit of case and

submissions of the parties in the suit.

41. With these directions, the present appeal is disposed of. No

costs.

MANMOHAN SINGH, J.

A.K. SIKRI, J.

December 19, 2008 sa/sd